A NONSUBSTANTIVE REVISION OF STATUTES RELATING TO THE LICENSURE OF INSURERS AND RELATED ENTITIES, LIFE INSURANCE, AND CERTAIN GROUP BENEFIT PROGRAMS

Transcription

1 A NONSUBSTANTIVE REVISION OF STATUTES RELATING TO THE LICENSURE OF INSURERS AND RELATED ENTITIES, LIFE INSURANCE, AND CERTAIN GROUP BENEFIT PROGRAMS FOR GOVERNMENTAL EMPLOYEES

2 Submitted to the 77th Legislature as part of the Texas Legislative Council's Statutory Revision Program Austin, Texas 2001

3 FOREWORD The Texas Legislative Council is required by law (Section , Government Code) to carry out a complete nonsubstantive revision of the Texas statutes. The process involves reclassifying and rearranging the statutes in a more logical order, employing a numbering system and format that will accommodate future expansion of the law, eliminating repealed, invalid, duplicative, and other ineffective provisions, and improving the draftsmanship of the law if practicable--all toward promoting the stated purpose of making the statutes "more accessible, understandable, and usable" without altering the sense, meaning, or effect of the law. Under the new classification scheme adopted by the council, the statutes will eventually consist of 26 codes. To date, the council has produced and the legislature has enacted the Agriculture Code, Alcoholic Beverage Code, Business & Commerce Code, Civil Practice and Remedies Code, Education Code, Election Code (which was a substantive revision), Finance Code, Government Code, Health and Safety Code, Human Resources Code, Labor Code, Local Government Code, Natural Resources Code, Occupations Code, Parks and Wildlife Code, Property Code, Tax Code (Title 1 of which was a substantive revision), Transportation Code, Utilities Code, and Water Code. The council staff also assisted the state bar in the Penal Code and Family Code projects, which were substantive revisions, and revised miscellaneous criminal procedure provisions as Title 2 of the Code of Criminal Procedure. Titles 6 and 7, and Subtitle H, Title 8, Insurance Code, are a nonsubstantive revision of the Texas statutes relating to the licensure of insurers and related entities, life insurance, and certain group benefit programs for governmental employees. These titles are derived from provisions of the Insurance Code of

4 previously designated as part of Title 1, Insurance Code. When the revision of the Insurance Code is complete, the code will be divided into titles, subtitles, chapters, subchapters, and sections. Sections will be numbered decimally, and the number to the left of the decimal point is the same as the chapter number. Note that gaps in chapter and section numbering are for future expansion. The material that has been incorporated in this nonsubstantive revision by the 77th Legislature is added to the Insurance Code of 1951 as Titles 6 and 7 and Subtitle H, Title 8. Material incorporated into the revision of the Insurance Code by the 76th Legislature is designated as Title 2. Existing material in the Insurance Code that is not affected by either revision is contained in Title 1. The revisor's report reflects Titles 6 and 7 and Subtitle H, Title 8, Insurance Code, as enacted by the passage of H.B. No. 2811, Acts of the 77th Legislature, Regular Session, The revisor's report states the, which is the text of the new law, and then provides the, which is the text of the former law from which the revised law is derived. If further explanation of either the revised law or the source law is required, a Revisor's Note is included after the source law. All substance in the source law is revised in the revised law or the reason for its omission is explained in a revisor's note. Note that, to provide all affected parties a complete legislative cycle to more closely review the revision, Titles 6 and 7 and Subtitle H, Title 8, Insurance Code, will not take effect until June 1, Because of the extensive reorganization of many statutes, and even sentences within a statute, it may be helpful to refer to the source law as printed in the Insurance Code as it existed before the revision (so that the quoted source law may be seen in its former context) and to the disposition table (showing where 4

5 the former statutes appear, as revised, in the code). The disposition table is printed as Appendix C to the revisor's report. The revision required conforming amendments to several statutes. These conforming amendments, which were also enacted into law by the passage of H.B. No. 2811, are printed in Appendix A to the revisor's report. Appendix A also includes a section listing the laws repealed effective June 1, 2003, and a section stating the legislature's intent that the code be a nonsubstantive revision. In reviewing the revisor's report to Titles 6 and 7 and Subtitle H, Title 8, Insurance Code, the reader should keep in mind the following: (1) Except as provided by Section , Insurance Code, as amended by H.B. No. 2811, the Code Construction Act (Chapter 311, Government Code) applies to the code. That act sets out certain principles of statutory construction applicable to new codes and also provides some definitions. The act is printed as Appendix B to the revisor's report. (2) The proposed code is written in modern American English. Where possible, the present tense is used; the active rather than the passive voice is preferred; and the singular is used in preference to the plural. (3) This is a nonsubstantive revision. The staff's authority does not include improving the substance of law. The sole purpose of this project was to compile all the relevant law, arrange it in a logical fashion, and rewrite it without altering its meaning or legal effect. If a particular source statute is ambiguous and the ambiguity cannot be resolved without a potential substantive effect, the ambiguity was preserved. 5

6 This project was under the direction of Deborah Fulton, Legislative Counsel, of the council staff. Questions may be directed to her at P.O. Box 12128, Capitol Station, Austin, Texas 78711, or at telephone number (512)

7 TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES SUBTITLE A. GENERAL PROVISIONS APPLICABLE TO INSURERS AND RELATED ENTITIES CHAPTER 801. CERTIFICATE OF AUTHORITY CHAPTER 802. ANNUAL STATEMENT CHAPTER 803. LOCATION OF BOOKS, RECORDS, ACCOUNTS, AND OFFICES OUTSIDE OF THIS STATE CHAPTER 804. SERVICE OF PROCESS CHAPTER 805. DIRECTORS, OFFICERS, AND OTHER INTERESTED PERSONS [Chapters reserved for expansion] SUBTITLE B. ORGANIZATION OF REGULATED ENTITIES CHAPTER 821. GENERAL PROVISIONS CHAPTER 822. GENERAL INCORPORATION AND REGULATORY REQUIREMENTS FOR INSURANCE COMPANIES OTHER THAN LIFE, HEALTH, OR ACCIDENT INSURANCE COMPANIES CHAPTER 823. INSURANCE HOLDING COMPANY SYSTEMS CHAPTER 824. MERGER AND CONSOLIDATION OF STOCK INSURANCE CORPORATIONS CHAPTER 825. CONVERSION OF STOCK INSURANCE COMPANY TO MUTUAL INSURANCE COMPANY CHAPTER 826. CONVERSION OF MUTUAL INSURANCE COMPANY TO STOCK INSURANCE COMPANY CHAPTER 827. WITHDRAWAL AND RESTRICTION PLANS CHAPTER 828. PURCHASE OF STOCK FOR TOTAL ASSUMPTION REINSURANCE [Chapters reserved for expansion] SUBTITLE C. LIFE, HEALTH, AND ACCIDENT INSURERS AND RELATED ENTITIES CHAPTER 841. LIFE, HEALTH, OR ACCIDENT INSURANCE COMPANIES CHAPTER 842. GROUP HOSPITAL SERVICE CORPORATIONS CHAPTER 843. HEALTH MAINTENANCE ORGANIZATIONS 7

8 CHAPTER 844. CERTIFICATION OF CERTAIN NONPROFIT HEALTH CORPORATIONS CHAPTER 845. STATEWIDE RURAL HEALTH CARE SYSTEM CHAPTER 846. MULTIPLE EMPLOYER WELFARE ARRANGEMENTS [Chapters reserved for expansion] SUBTITLE D. CASUALTY COMPANIES CHAPTER 861. GENERAL CASUALTY COMPANIES CHAPTER 862. FIRE AND MARINE INSURANCE COMPANIES [Chapters reserved for expansion] SUBTITLE E. MUTUAL AND FRATERNAL COMPANIES AND RELATED ENTITIES CHAPTER 881. STATEWIDE MUTUAL ASSESSMENT COMPANIES CHAPTER 882. MUTUAL LIFE INSURANCE COMPANIES CHAPTER 883. MUTUAL INSURANCE COMPANIES OTHER THAN MUTUAL LIFE INSURANCE COMPANIES CHAPTER 884. STIPULATED PREMIUM INSURANCE COMPANIES CHAPTER 885. FRATERNAL BENEFIT SOCIETIES CHAPTER 886. LOCAL MUTUAL AID ASSOCIATIONS CHAPTER 887. PROVISIONS APPLICABLE TO CERTAIN MUTUAL ASSESSMENT COMPANIES CHAPTER 888. BURIAL ASSOCIATIONS [Chapters reserved for expansion] SUBTITLE F. FARM AND COUNTY MUTUAL INSURANCE COMPANIES CHAPTER 911. FARM MUTUAL INSURANCE COMPANIES CHAPTER 912. COUNTY MUTUAL INSURANCE COMPANIES [Chapters reserved for expansion] SUBTITLE G. LLOYD'S PLAN AND RECIPROCAL AND INTERINSURANCE EXCHANGES CHAPTER 941. LLOYD'S PLAN CHAPTER 942. RECIPROCAL AND INTERINSURANCE EXCHANGES [Chapters reserved for expansion] SUBTITLE H. OTHER ENTITIES CHAPTER 961. NONPROFIT LEGAL SERVICES CORPORATIONS [Chapters reserved for expansion] 8

9 SUBTITLE I. COMPANIES THAT ARE NOT ORGANIZED IN TEXAS CHAPTER 981. SURPLUS LINES INSURANCE CHAPTER 982. FOREIGN AND ALIEN INSURANCE COMPANIES CHAPTER 983. REDOMESTICATION OF INSURERS AND HEALTH MAINTENANCE ORGANIZATIONS CHAPTER 984. MEXICAN CASUALTY INSURANCE COMPANIES TITLE 7. LIFE INSURANCE AND ANNUITIES SUBTITLE A. LIFE INSURANCE IN GENERAL CHAPTER LIFE INSURANCE CHAPTER PAYMENT OF INSURANCE BENEFITS IN CURRENCY CHAPTER LIFE INSURANCE POLICY BENEFICIARIES CHAPTER LIFE INSURANCE AND ANNUITY CONTRACTS ISSUED TO CERTAIN PERSONS CHAPTER STANDARD NONFORFEITURE LAW FOR LIFE INSURANCE CHAPTER REINSTATEMENT OF CERTAIN LIFE INSURANCE POLICIES CHAPTER STANDARD NONFORFEITURE LAW FOR CERTAIN ANNUITIES CHAPTER BENEFITS EXEMPT FROM SEIZURE CHAPTER UNCLAIMED LIFE INSURANCE AND ANNUITY CONTRACT PROCEEDS CHAPTER INTEREST RATES ON CERTAIN POLICY LOANS CHAPTER LIFE AND VIATICAL SETTLEMENTS AND ACCELERATED TERM LIFE INSURANCE BENEFITS [Chapters reserved for expansion] SUBTITLE B. GROUP LIFE INSURANCE CHAPTER GROUP LIFE INSURANCE AND WHOLESALE, FRANCHISE, OR EMPLOYEE LIFE INSURANCE CHAPTER NOTICE OF RATE INCREASE FOR GROUP LIFE INSURANCE [Chapters reserved for expansion] 9

10 SUBTITLE C. SPECIALIZED COVERAGES CHAPTER INDUSTRIAL LIFE INSURANCE CHAPTER SEPARATE ACCOUNTS, VARIABLE CONTRACTS, AND RELATED PRODUCTS CHAPTER CREDIT LIFE INSURANCE AND CREDIT ACCIDENT AND HEALTH INSURANCE TITLE 8. HEALTH INSURANCE AND OTHER HEALTH COVERAGES [Subtitles A-G reserved] SUBTITLE H. HEALTH BENEFITS AND OTHER COVERAGES FOR GOVERNMENTAL EMPLOYEES CHAPTER TEXAS EMPLOYEES GROUP BENEFITS ACT CHAPTER GROUP LONG-TERM CARE INSURANCE FOR STATE EMPLOYEES [Chapters reserved for expansion] CHAPTER TEXAS PUBLIC SCHOOL EMPLOYEES GROUP BENEFITS PROGRAM CHAPTER GROUP LONG-TERM CARE INSURANCE FOR PUBLIC SCHOOL EMPLOYEES CHAPTER REQUIRED AVAILABILITY OF INSURANCE FOR SCHOOL DISTRICT EMPLOYEES AND RETIREES CHAPTER PURCHASE OF INSURANCE BY ASSOCIATION OF TEACHERS AND SCHOOL ADMINISTRATORS [Chapters reserved for expansion] CHAPTER UNIFORM INSURANCE BENEFITS ACT FOR EMPLOYEES OF THE UNIVERSITY OF TEXAS SYSTEM AND THE TEXAS A&M UNIVERSITY SYSTEM [Chapters reserved for expansion] CHAPTER TRANSFER BETWEEN CERTAIN GOVERNMENTAL PROGRAMS TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES SUBTITLE A. GENERAL PROVISIONS APPLICABLE TO INSURERS AND RELATED ENTITIES 10

11 CHAPTER 801. CERTIFICATE OF AUTHORITY SUBCHAPTER A. GENERAL PROVISIONS Sec DEFINITIONS 5 Sec EXEMPTION FOR CERTAIN FRATERNAL BENEFIT SOCIETIES 7 [Sections reserved for expansion] SUBCHAPTER B. CERTIFICATE OF AUTHORITY Sec ISSUANCE OF CERTIFICATE; ELIGIBILITY 8 Sec EFFECT AND CONTENTS OF CERTIFICATE 9 Sec DURATION OF CERTIFICATE 9 Sec PREFERENCE FOR DOMESTIC COMPANY 10 Sec DEPOSIT OF FEES 10 Sec FAILURE TO PROVIDE COMPLETE SET OF FINGERPRINTS: GROUND FOR DENIAL OF APPLICATION 11 Sec FAILURE TO FILE ANNUAL STATEMENT: GROUND FOR REVOCATION OR SUSPENSION 11 [Sections reserved for expansion] SUBCHAPTER C. COMPETENCE, FITNESS, OR REPUTATION Sec DEPARTMENT INQUIRY 12 Sec DENIAL OF APPLICATION OR REVOCATION OF CERTIFICATE 12 [Sections reserved for expansion] SUBCHAPTER D. FELONY CONVICTION Sec ISSUANCE OF CERTIFICATE PROHIBITED 14 Sec REVOCATION OF CERTIFICATE 14 Sec PETITION FOR ISSUANCE OR REINSTATEMENT OF CERTIFICATE 14 Sec GRANT OF PETITION 15 Sec RULES RELATING TO CONTENTS OF PETITION 16 CHAPTER 801. CERTIFICATE OF AUTHORITY SUBCHAPTER A. GENERAL PROVISIONS Sec DEFINITIONS. In this chapter: (1) "Control" has the meaning described by Section (2) "Insurer" means the issuer of an insurance policy 11

12 that is issued to another in consideration of a premium and that insures against a loss that may be insured against under the law. The term includes a: (A) fraternal benefit society; (B) Lloyd's plan; (C) mutual company of any kind, including a: (i) statewide mutual assessment association; (ii) local mutual aid association or burial association; and (iii) county or farm mutual insurance company; (D) reciprocal or interinsurance exchange; and (E) stock company. (3) "Person" has the meaning assigned by Section (V.T.I.C. Art. 1.14, Secs. 2 (part), 3 (part).) Sec. 2. The word "Carrier" as herein used is defined as that type of insurer which, in consideration of premium, issues policies to others insuring against those losses which may be insured against under the provisions of the law, including stock companies, reciprocals or inter-insurance exchanges, Lloyds' associations, fraternal benefit societies and mutual companies of all kinds, including state-wide assessment associations, local mutual aids, burial associations, and county and farm mutual fire associations.... Sec As used in this section, "control" and "person" have the meanings assigned by Section 2, Article of this code.... Revisor's Note (1) Section 2, V.T.I.C. Article 1.14, defines "carrier." The revised law substitutes "insurer" for "carrier" for consistency of terms in this chapter and because "insurer" is the more commonly used modern term. Throughout this chapter, references to "carrier" have been changed appropriately. 12

13 (2) Section 2, V.T.I.C. Article 1.14, in the definition of "carrier," revised in this section as the definition of "insurer," refers to county and farm mutual fire associations. The revised law omits the reference to "fire" because Section 2 applies to mutual companies "of all kinds." It is clear, therefore, that all kinds of county and farm mutual insurance companies are included in the meaning of the defined term. Sec EXEMPTION FOR CERTAIN FRATERNAL BENEFIT SOCIETIES. This chapter does not apply to a fraternal benefit society that: (1) sells insurance policies only as an incidental benefit to its members; and (2) on September 6, 1955, was: (A) organized and licensed by the department as a fraternal benefit society; or (B) exempt under former Article or 10.38, revised as Section (V.T.I.C. Art. 1.14, Sec. 3 (part).) Sec Provided, however, that fraternal benefit societies that sell insurance policies only as an incidental benefit to their members and which are now so organized and licensed by the Board of Insurance Commissioners of Texas or which are now exempt under the provisions of Article or Article of the Insurance Code are hereby exempted from the provisions of this Act. Revisor's Note (1) Section 3, V.T.I.C. Article 1.14, exempts from the application of V.T.I.C. Article 1.14, revised in part as this chapter, certain fraternal benefit societies that are "now" organized and licensed by the Texas Department of Insurance or "now" exempt under Article or 10.38, Insurance Code. Chapter 117, Acts of the 54th Legislature, Regular Session, 1955, added Section 3 to V.T.I.C. Article 1.14 and was effective 13

14 September 6, The revised law substitutes "September 6, 1955," for the references to "now." (2) Section 3, V.T.I.C. Article 1.14, refers to the "Board of Insurance Commissioners of Texas." Under Chapter 499, Acts of the 55th Legislature, Regular Session, 1957, administration of the insurance laws of this state was reorganized and the powers and duties of the Board of Insurance Commissioners were transferred to the State Board of Insurance. Chapter 685, Acts of the 73rd Legislature, Regular Session, 1993, abolished the State Board of Insurance and transferred its functions to the commissioner of insurance and the Texas Department of Insurance. Chapter 31 of this code defines "commissioner" and "department" for purposes of this code and the other insurance laws of this state to mean the commissioner of insurance and Texas Department of Insurance, respectively. Throughout this chapter, references to the Board of Insurance Commissioners and the State Board of Insurance have been changed appropriately. [Sections reserved for expansion] SUBCHAPTER B. CERTIFICATE OF AUTHORITY Sec ISSUANCE OF CERTIFICATE; ELIGIBILITY. The department shall issue under the department's seal a certificate of authority to act as an insurer to an applicant applying for the certificate if the department determines that the applicant has complied with the law. (V.T.I.C. Art. 1.14, Sec. 1 (part).) Sec Should the State Board of Insurance be satisfied that any insurance carrier applying for a certificate of authority has in all respects fully complied with the law, it shall be its duty to issue to such carrier a certificate of authority, under its seal.... Revisor's Note Section 1, V.T.I.C. Article 1.14, prohibits certain persons from engaging in the business of insurance unless permitted by 14

15 statute. The revised law omits that part of Section 1 as unnecessary because it duplicates Section , Insurance Code (prohibiting a person from doing an act that constitutes the business of insurance except as authorized by statute). The omitted law reads: Art Sec. 1. No individual, group of individuals, association or corporation, unless now or hereafter otherwise permitted by statute, shall be permitted to engage in the business of insuring others against those losses which may be insured against under the laws of this state.... Sec EFFECT AND CONTENTS OF CERTIFICATE. A certificate of authority issued to an insurer under this chapter authorizes the insurer to engage in the business of insurance. The certificate of authority must state the specific kinds of insurance authorized under the certificate. (V.T.I.C. Art. 1.14, Sec. 1 (part).) Sec a certificate of authority... authorizing such carrier to transact insurance business, naming therein the particular kinds of insurance.... Sec DURATION OF CERTIFICATE. A certificate of authority issued to an insurer under this chapter is effective until it is suspended or revoked. (V.T.I.C. Art. 1.14, Sec. 1 (part).) Sec Each such certificate of authority heretofore or hereafter issued shall be in full force and effect until it is revoked, canceled or suspended according to law;

16 Revisor's Note (1) Section 1, V.T.I.C. Article 1.14, refers to a certificate "in full force and effect." The revised law omits the reference to "full force" because "in full force" is included in the meaning of "in effect." (2) Section 1, V.T.I.C. Article 1.14, refers to a certificate of authority that is "revoked, canceled or suspended." Throughout this chapter, the revised law omits "canceled" because its meaning is included in the meaning of "revoked." Sec PREFERENCE FOR DOMESTIC COMPANY. In issuing a certificate of authority to an applicant under this chapter, the department shall give preference to an application submitted by a domestic company. (V.T.I.C. Art. 1.14, Sec. 2 (part).) Sec Provided that the Board of Insurance Commissioners shall give preference to applications of domestic companies in... issuing Certificates of Authority. Sec DEPOSIT OF FEES. A fee collected by the department under this chapter for a certificate of authority shall be deposited to the credit of the Texas Department of Insurance operating account. (V.T.I.C. Art. 1.14, Sec. 1A.) Sec. 1A. Fees collected by the State Board of Insurance under this article for a certificate of authority shall be deposited in the State Treasury to the credit of the State Board of Insurance operating fund. 16

17 Revisor's Note Section 1A, V.T.I.C. Article 1.14, requires fees to be deposited in the state treasury to the credit of the State Board of Insurance operating fund. Under the authority of Chapter 4, Acts of the 72nd Legislature, 1st Called Session, 1991, the Texas Department of Insurance operating fund (the later name of the State Board of Insurance operating fund) was converted to an account in the general revenue fund. The revised law is drafted accordingly. Sec FAILURE TO PROVIDE COMPLETE SET OF FINGERPRINTS: GROUND FOR DENIAL OF APPLICATION. (a) In this section, "authorization" means any authorization issued by the department to engage in an activity regulated under this code, including: (1) a certificate of authority; (2) a certificate of registration; (3) a license; and (4) a permit. (b) The department may deny an application for an authorization if the applicant or a corporate officer of the applicant fails to provide a complete set of fingerprints on request by the department. (V.T.I.C. Art. 1.10C, Subsec. (e) (part).) (e) The department may deny... an applicant for any license, permit, certificate of authority or certificate of registration who fails to provide a complete set of fingerprints on request and may deny a certificate of authority to an insurance company whose corporate officers fail to provide complete sets of fingerprints on request. 17

18 Sec FAILURE TO FILE ANNUAL STATEMENT: GROUND FOR REVOCATION OR SUSPENSION. A certificate of authority of an insurer that fails to file an annual statement required by law is subject to being suspended or revoked by the department. (V.T.I.C. Art. 1.14, Sec. 1 (part).) Sec provided, however, that failure to file any annual statement required by law will subject the certificate of authority to being revoked, canceled or suspended. [Sections reserved for expansion] SUBCHAPTER C. COMPETENCE, FITNESS, OR REPUTATION Sec DEPARTMENT INQUIRY. The department may inquire into the competence, fitness, or reputation of: (1) an officer or director of an insurer; or (2) a person having control of an insurer. (V.T.I.C. Art. 1.14, Sec. 3 (part).) Sec. 3. The Board may inquire into the competence, fitness and reputation of the officers and directors of each carrier and of any person having control of such carrier.... Sec DENIAL OF APPLICATION OR REVOCATION OF CERTIFICATE. If after conducting an inquiry under Section the department determines that, based on substantial evidence, the person who is the subject of the inquiry is not worthy of the public confidence, the department shall, after written notice and hearing: (1) deny the application for a certificate of authority; or 18

19 (2) revoke the insurer's certificate of authority. (V.T.I.C. Art. 1.14, Sec. 3 (part).) Sec If, after inquiry, and based on substantial evidence, it shall appear to the Board that such officers, directors and any person having control of such carrier, or any of them, are not worthy of the public confidence, it shall give such carrier notice in writing [of its intention to refuse the application for Certificate of Authority, or to revoke the certificate once granted,].... After notice and hearing, [the Board shall... record... its findings and order,] which shall be subject to full review as provided by Article 1.04(f) of this code.... Revisor's Note (1) Section 3, V.T.I.C. Article 1.14, requires the Texas Department of Insurance to give notice of its intention to deny an application for a certificate of authority or to revoke a certificate of authority, but does not expressly require the department to deny the application or revoke the certificate. The revised law clarifies the department's duty to deny an application or revoke a certificate by including an express statement to that effect. (2) Section 3, V.T.I.C. Article 1.14, includes certain notice and hearing procedures relating to the denial of an application for a certificate of authority or the revocation of a certificate of authority by the Texas Department of Insurance. In 1976, those provisions were impliedly repealed by the Administrative Procedure and Texas Register Act (Chapters 2001 and 2002, Government Code), which prescribes the procedures to be used by a state agency in denying an application or revoking a certificate. The original enactment of the Administrative Procedure and Texas Register Act repeals all conflicting law. The language in Section 3 relating to the notice and hearing procedures is omitted from the revised law because the enactment 19

20 of that language predates the administrative procedure law and is repealed. The omitted law reads: Sec [it shall give such carrier notice in writing] of its intention to refuse the application for Certificate of Authority, or to revoke the certificate once granted, stating specifically why the Board intends such action, and the place and time for hearing by the Board, not sooner than ten (10) days nor later than twenty (20) days thereafter. [After notice and hearing,] the Board shall forthwith record in its official minutes its findings and order.... (3) Section 3, V.T.I.C. Article 1.14, refers to the findings and order of the Texas Department of Insurance, "which shall be subject to full review as provided by Article 1.04(f) of this code." The revised law omits the quoted language as unnecessary because it duplicates the authority provided under Subchapter D, Chapter 36, Insurance Code, which was formerly V.T.I.C. Article [Sections reserved for expansion] SUBCHAPTER D. FELONY CONVICTION Sec ISSUANCE OF CERTIFICATE PROHIBITED. Except as provided by Sections and , the department may not issue a certificate of authority to an applicant if a corporate officer or member of the board of directors of the applicant has been convicted of a felony involving: (1) moral turpitude; or (2) breach of a fiduciary duty. (V.T.I.C. Art. 1.14A, Subsec. (a).) Art. 1.14A. (a) Except as provided by Subsection (c) of this section, the department may not issue a certificate of authority to an insurance company if a corporate officer or a member of the board of directors of the company has been convicted of a felony involving moral turpitude or breach of a 20

21 fiduciary duty. Sec REVOCATION OF CERTIFICATE. After notice and hearing, the department may revoke the certificate of authority of an insurer if a corporate officer or member of the board of directors of the insurer is convicted of a felony involving: (1) moral turpitude; or (2) breach of a fiduciary duty. (V.T.I.C. Art. 1.14A, Subsec. (b).) (b) The department may, after notice and hearing, revoke the certificate of authority of an insurance company if a corporate officer or member of the board of directors of the company is convicted of a felony involving moral turpitude or breach of a fiduciary duty. Sec PETITION FOR ISSUANCE OR REINSTATEMENT OF CERTIFICATE. A company may petition the commissioner for issuance or reinstatement of a certificate of authority of the company that is denied or revoked under this subchapter: (1) not earlier than the later of: (A) the fifth anniversary of the date of the final conviction; or (B) if the officer or director is sentenced to confinement or imprisonment or placed on community supervision, the fifth anniversary of the date the officer or director completes the sentence or period of community supervision; or (2) after the officer or director ceases to be an officer or director of the insurer. (V.T.I.C. Art. 1.14A, Subsecs. (c), (d) (part), (e).) 21

22 (c) A company whose application for issuance of a certificate of authority has been denied under Subsection (a) of this section or whose certificate of authority has been revoked under Subsection (b) of this section may petition the commissioner for issuance or reinstatement of the certificate. (d) Except as provided by Subsection (e) of this section, a petition for issuance or reinstatement of a certificate of authority may not be made before the date five years after the date of final conviction or, if the officer or director of the petitioner has been sentenced to prison or to probation, five years after the date the sentence or probation terminates.... (e) A petition for issuance or reinstatement of a certificate of authority may be made at any time after the officer or director who has been convicted of a felony involving moral turpitude or breach of a fiduciary duty is no longer an officer or director of the company. Revisor's Note Subsection (d), V.T.I.C. Article 1.14A, refers to "probation." The revised law substitutes "community supervision" for "probation" because under Section 4.04(a), Chapter 900, Acts of the 73rd Legislature, Regular Session, 1993, a reference in law to "probation" means "community supervision." Sec GRANT OF PETITION. The commissioner shall grant a petition for issuance or reinstatement of a certificate of authority under this subchapter if the petitioner demonstrates that granting the petition would be in the public interest and that justice would best be served by granting the petition. (V.T.I.C. Art. 1.14A, Subsec. (f).) 22

23 (f) The commissioner shall grant the petition if the petitioner demonstrates that it would be in the public interest and that justice would best be served if the certificate of authority were issued or reinstated. Sec RULES RELATING TO CONTENTS OF PETITION. The department may adopt rules under this subchapter prescribing the contents of a petition for issuance or reinstatement of a certificate of authority. (V.T.I.C. Art. 1.14A, Subsec. (d) (part).) (d)... The board may adopt rules setting forth the contents of the petition. CHAPTER 802. ANNUAL STATEMENT SUBCHAPTER A. ANNUAL STATEMENT OF INSURANCE COMPANIES Sec FORM OF ANNUAL STATEMENT 17 Sec ACTUARIAL OPINION REQUIRED 17 Sec FILING DATE OF ANNUAL STATEMENT DELIVERED BY POSTAL SERVICE 18 [Sections reserved for expansion] SUBCHAPTER B. FILING WITH NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS Sec APPLICABILITY OF SUBCHAPTER 19 Sec CONCURRENT FILING WITH NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS 20 Sec EXEMPTION AUTHORITY 22 Sec COMPLIANCE 22 Sec COSTS 22 Sec STATUS OF REPORTS AND OTHER INFORMATION 23 23

24 CHAPTER 802. ANNUAL STATEMENT SUBCHAPTER A. ANNUAL STATEMENT OF INSURANCE COMPANIES Sec FORM OF ANNUAL STATEMENT. (a) The commissioner, as necessary to obtain an accurate indication of the company's condition and method of transacting business, may change the form of any annual statement required to be filed by any kind of insurance company. (b) The form may require only information that relates to the business of the insurance company. (V.T.I.C. Art. 1.11, Subsec. (a) (part).) Art (a) The commissioner may, from time to time, make such changes in the forms of the annual statements required of insurance companies of any kind, as shall seem to it best adapted to elicit a true exhibit of their condition and methods of transacting business. Such form shall elicit only such information as shall pertain to the business of the company.... Revisor's Note Subsection (a), V.T.I.C. Article 1.11, provides that the commissioner may modify the form of annual statements "from time to time." The revised law omits the quoted language as unnecessary because, in this context, the power to take an action includes the power to act "from time to time." Sec ACTUARIAL OPINION REQUIRED. (a) In this section, "qualified actuary" means: (1) a member in good standing of the American Academy of Actuaries; or (2) a person who has otherwise demonstrated actuarial competence to the satisfaction of the commissioner or an insurance regulatory official of another state in which the insurance company is domiciled. 24

25 (b) An insurance company's annual statement must include a statement of a qualified actuary entitled "Statement of Actuarial Opinion" that: (1) is located on or is attached to the first page of the annual statement; and (2) provides the opinion of the actuary relating to policy reserves and other actuarial items for life insurance, accident and health insurance, and annuities, or loss and loss adjustment expense reserves for property and casualty risks, as described in the annual statement instructions of the National Association of Insurance Commissioners as appropriate for the type of risks insured. (V.T.I.C. Art. 1.11, Subsecs. (c), (d).) (c) Included on or attached to page 1 of the annual statement shall be the statement of a qualified actuary, entitled "Statement of Actuarial Opinion," setting forth his or her opinion relating to policy reserves and other actuarial items for life, accident and health, and annuities, or loss and loss adjustment expense reserves for property and casualty risks, as described in the NAIC annual statement instructions as appropriate for the type of risks insured. (d) In this article, "qualified actuary" means a member in good standing of the American Academy of Actuaries or a person who has otherwise demonstrated actuarial competence to the satisfaction of the commissioner of insurance or other insurance regulatory official of the insurer's domiciliary state. Sec FILING DATE OF ANNUAL STATEMENT DELIVERED BY POSTAL SERVICE. Except as otherwise specifically provided, for an annual statement that is required to be filed in the offices of the commissioner and that is delivered by the United States Postal Service to the offices of the commissioner after the date on which the annual statement is required to be filed, the date of filing is: 25

26 (1) the date of the postal service postmark stamped on the cover in which the document is mailed; or (2) any other evidence of mailing authorized by the postal service reflected on the cover in which the document is mailed. (V.T.I.C. Art. 1.11(a) (part).) (a)... If any annual statement,... required to be filed or deposited in the offices of the commissioner,... is delivered by the United States Postal Service to the offices of the commissioner..., as required, after the prescribed date on which the annual statement,... is to be filed, the date of the United States Postal Service postmark stamped on the cover in which the document is mailed, or any other evidence of mailing authorized by the United States Postal Service reflected on the cover in which the document is mailed, shall be deemed to be the date of filing, unless otherwise specifically made an exception to this general statute. [Sections reserved for expansion] SUBCHAPTER B. FILING WITH NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS Sec APPLICABILITY OF SUBCHAPTER. This subchapter applies to each company regulated by the commissioner, including: (1) a stock life, health, or accident insurance company; (2) a mutual life, health, or accident insurance company; (3) a stock fire or casualty insurance company; (4) a mutual fire or casualty insurance company; (5) a Mexican casualty company; (6) a Lloyd's plan; (7) a reciprocal or interinsurance exchange; (8) a fraternal benefit society; 26

27 (9) a title insurance company; (10) an attorney's title insurance company; (11) a stipulated premium insurance company; (12) a nonprofit legal service corporation; (13) a health maintenance organization; (14) a statewide mutual assessment company; (15) a local mutual aid association; (16) a local mutual burial association; (17) an association exempt under Section ; (18) a nonprofit hospital, medical, or dental service corporation, including a company subject to Chapter 842; (19) a county mutual insurance company; and (20) a farm mutual insurance company. (V.T.I.C. Art. 1.11, Subsec. (b) (part).) (b)... This section is applicable to all companies regulated by the State Board of Insurance including domestic and foreign, stock and mutual life, health, and accident insurance companies; domestic and foreign, stock and mutual, fire and casualty insurance companies; Mexican casualty companies; domestic and foreign Lloyd's plan insurers; domestic and foreign reciprocal or interinsurance exchanges; domestic and foreign fraternal benefit societies; domestic and foreign title insurance companies; attorney's title insurance companies; stipulated premium insurance companies; nonprofit legal service corporations; health maintenance organizations; statewide mutual assessment companies; local mutual aid associations; local mutual burial associations; exempt associations under Article of this code; nonprofit hospital, medical, or dental service corporations including companies subject to Chapter 20 of this code; county mutual insurance companies; and farm mutual insurance companies

28 Revisor's Note V.T.I.C. Article 1.11(b) provides that the article is applicable to all companies regulated by the the State Board of Insurance (meaning the Texas Department of Insurance), including certain "domestic or foreign" insurers. The revised law omits the reference to "domestic or foreign" as unnecessary. The authority of the department to regulate domestic and foreign insurance companies is specified in other provisions of the code and, because the revised law applies to all companies regulated by the department, it is not necessary to distinguish domestic and foreign companies in this section. Sec CONCURRENT FILING WITH NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS. (a) Each domestic, foreign, or alien insurance company authorized to engage in the business of insurance in this state shall file a copy of the company's annual statement with the National Association of Insurance Commissioners at the time the company files the statement with the commissioner. (b) The statement required by Subsection (a) must: (1) meet requirements adopted by the commissioner, including: (A) a change in substance or form; (B) an additional filing; and (C) any requirement that the statement be in a computer compatible format; and (2) include the signed jurat page and the actuarial opinion, as required by the jurisdiction in which the insurance company is domiciled. (c) The insurance company shall also file with the National Association of Insurance Commissioners a copy of any amendment or addition to the annual statement that is subsequently filed with the commissioner. (V.T.I.C. Art. 1.11, Subsec. (b) (part).) 28

29 (b) Each domestic, foreign, and alien insurer authorized to transact insurance in this state, at the time it files its annual statement with the State Board of Insurance, shall file with the National Association of Insurance Commissioners a copy of its annual statement, along with any changes in substance and form, including a requirement that the submission be in computer compatible format, or additional filings, if any, as may be prescribed by the State Board of Insurance. The information filed shall include the signed jurat page and the actuarial certification, as required by the state of domicile. Any amendments and additions to the annual statement subsequently filed with the State Board of Insurance also shall be filed with the National Association of Insurance Commissioners.... Revisor's Note Subsection (b), V.T.I.C. Article 1.11, refers to an "actuarial certification, as required by the state of domicile." The revised law substitutes "opinion" for "certification" for consistency with the terminology used in Subsection (c), V.T.I.C. Article 1.11, revised in this code as Section The revised law substitutes "jurisdiction" for "state" because Subsection (b), V.T.I.C. Article 1.11, applies to alien insurance companies. An alien insurance company is a company domiciled in a foreign country, and "jurisdiction" is a more appropriate term in that context. Sec EXEMPTION AUTHORITY. The commissioner may exempt any class of insurance companies from the requirements of this subchapter if the commissioner believes the information required under this subchapter will not be useful for regulatory purposes. (V.T.I.C. Art. 1.11, Subsec. (b) (part).) 29

30 (b)... The Board may exempt any class of insurers from the requirements of this section if the Board believes the information required by this section will not be useful for regulatory purposes.... Sec COMPLIANCE. The commissioner may consider a foreign insurance company to be in compliance with the requirements of Section if the company is domiciled in a state with a law substantially similar to that section. (V.T.I.C. Art. 1.11, Subsec. (b) (part).) (b)... The Board may deem foreign insurers that are domiciled in a state that has a law substantially similar to this section to be in compliance with this section.... Sec COSTS. (a) An insurance company shall pay the costs of preparing and furnishing to the National Association of Insurance Commissioners the information required under Section (b) Except as provided by Subsection (a), costs relating to providing the information required under Section may not be assessed against an insurance company. (V.T.I.C. Art. 1.11, Subsec. (b) (part).) (b)... The expense for preparing and furnishing such annual statement and other filings to the National Association of Insurance Commissioners shall be that of the insurer. There shall be no other costs or expenses of any kind levied, charged, or assessed against the insurer relating to such filings

31 Revisor's Note (1) Subsection (b), V.T.I.C. Article 1.11, prohibits certain "costs or expenses" from being "levied, charged, or assessed" against an insurance company. The revised law omits the reference to "expenses" because that term is included in the meaning of "costs." The revised law also omits the references to "levied" and "charged" because those terms are included in the meaning of "assessed." (2) Subsection (b), V.T.I.C. Article 1.11, refers to costs or expenses "of any kind." The revised law omits the quoted language because it is unnecessary and does not add to the clear meaning of the law. Sec STATUS OF REPORTS AND OTHER INFORMATION. A report or any other information resulting from the collection, review, analysis, and distribution of information developed from the filing of annual statement convention blanks and provided to the department by the National Association of Insurance Commissioners is considered part of the process of examination of insurance companies under this code, including Articles (V.T.I.C. Art. 1.11, Subsec. (b) (part).) (b)... Reports or other information communicated to the State Board of Insurance by the National Association of Insurance Commissioners from the collection, review, analysis, and dissemination of information developed from the filing of annual statement convention blanks is considered part of the process of examination of insurance companies under Articles of this code and other provisions of this code, and this information is an integral part of those examinations. Revisor's Note Subsection (b), V.T.I.C. Article 1.11, states that certain reports and information are considered a part of the process of examination of insurance companies, and that "this information is 31

32 an integral part of those examinations." The revised law omits the quoted language because it does not add to the clear meaning of the law. A statement that the information is considered part of the examination process is sufficient. An additional statement that the information is "an integral part" of that process is unnecessary. CHAPTER 803. LOCATION OF BOOKS, RECORDS, ACCOUNTS, AND OFFICES OUTSIDE OF THIS STATE Sec DEFINITIONS 24 Sec APPLICABILITY OF CHAPTER 26 Sec AUTHORITY TO LOCATE OUT OF STATE 27 Sec LOCATION AT BRANCH OR AGENCY OFFICE 29 Sec CONTROL OF BOOKS, RECORDS, ACCOUNTS, AND OFFICES 29 Sec AGENT FOR SERVICE OF PROCESS 30 Sec EXAMINATION EXPENSES 31 Sec RULES 31 Sec CONFLICTING PROVISIONS 32 CHAPTER 803. LOCATION OF BOOKS, RECORDS, ACCOUNTS, AND OFFICES OUTSIDE OF THIS STATE Sec DEFINITIONS. In this chapter: (1) "Domestic company" means any entity licensed, chartered, or organized under this code, including: (A) a county mutual insurance company; (B) a farm mutual insurance company; (C) a fire and marine insurance company; (D) a fraternal benefit society; (E) a general casualty company; (F) a group hospital service corporation; (G) a health maintenance organization; (H) a life, health, and accident insurance company; (I) a Lloyd's plan; (J) a local mutual aid association; (K) a mutual life insurance company; 32

33 (L) a mutual insurance company other than a mutual life insurance company; (M) a nonprofit legal services corporation; (N) a reciprocal exchange; (O) a statewide mutual assessment company; (P) a stipulated premium insurance company; (Q) a surety and trust company; and (R) a title insurance company. (2) "Insurance holding company system" has the meaning described by Section (V.T.I.C. Art. 1.28, Sec. 1(a) (part), New.) Art Sec. 1. (a)... a domestic insurance company, including a life, health, and accident insurance company, fire and marine insurance company, surety and trust company, general casualty company, title insurance company, fraternal benefit society, mutual life insurance company, local mutual aid association, statewide mutual assessment company, mutual insurance company other than life, farm mutual insurance company, county mutual insurance company, Lloyds plan, reciprocal exchange, group hospital service corporation, health maintenance organization, stipulated premium insurance company, nonprofit legal services corporation, or any other entity licensed under the Insurance Code or chartered or organized under the laws of this state... an insurance holding company system, as defined by Article , Insurance Code, as added by Chapter 356, Acts of the 62nd Legislature, Regular Session, 1971 (Article , Vernon's Texas Insurance Code),.... Revisor's Note (1) Section 1(a), V.T.I.C. Article 1.28, refers to a "domestic insurance company" or "any other entity licensed under the Insurance Code or chartered or organized under the laws of this state that is an affiliated member of an insurance holding 33

34 company system." "Insurance company" is a term used in conjunction with traditional insurance. Included in the source law are entities, such as health maintenance organizations, that are not insurers. Consequently, "domestic company" is a more accurate term than "insurance company." In addition, the revised law adds the definition of "domestic company" for drafting convenience and to eliminate frequent, unnecessary repetition of the substance of the definition. (2) Section 1(a), V.T.I.C. Article 1.28, refers to "a domestic insurance company... or any other entity licensed under the Insurance Code or chartered or organized under the laws of this state...." The revised law substitutes "chartered, or organized under this code" for "chartered or organized under the laws of this state" because all of the laws of this state relating to the chartering or organization of domestic insurance companies or other insurance entities have been codified in this code. Sec APPLICABILITY OF CHAPTER. This chapter applies only to a domestic company that is: (1) an affiliate of an insurance holding company system and in compliance with Chapter 823; (2) a nonprofit legal services corporation the claims and daily affairs of which are handled under contract by a foreign insurer that holds a certificate of authority to engage in a similar business in this state; or (3) a health maintenance organization that is affiliated with another health maintenance organization or a health care provider. (V.T.I.C. Art. 1.28, Secs. 1(a) (part), (b).) (a)... [a domestic insurance company]... that is an affiliated member of [an insurance holding company system,].... (b) The domestic insurance company must be: 34

35 (1) an affiliate of an insurance holding company system as defined in Article 21.49, Insurance Code, as added by Chapter 356, Acts of the 62nd Legislature, Regular Session, 1971 (Article , Vernon's Texas Insurance Code), that has made the necessary filings as required by that article and that is in compliance with that article; (2) a nonprofit legal services corporation whose claims and daily affairs are handled under contract by a foreign insurer licensed to do a similar business in this state; or (3) a health maintenance organization that is affiliated with other health maintenance organizations or health care providers. Revisor's Note (1) Section 1(b), V.T.I.C. Article 1.28, refers to an affiliate of an insurance holding company system "that has made the necessary filings as required by that article and that is in compliance with that article." The revised law omits the reference to "necessary filings as required by that article" as unnecessary because an affiliate must have made any "necessary" filings to be "in compliance with that article." (2) Section 1(b), V.T.I.C. Article 1.28, refers to a foreign insurer "licensed" to engage in business in this state. The revised law substitutes "that holds a certificate of authority" for "licensed" because "certificate of authority" is the term used throughout this code in relation to an entity's authority to engage in business. Sec AUTHORITY TO LOCATE OUT OF STATE. (a) A domestic company may locate and maintain its principal offices and all or any part of its books, records, and accounts outside this state at any other location in the United States if: (1) the company has given written notice of this intention to the commissioner, except as provided by Subsection (b); (2) the commissioner has not disapproved the notice 35